As a legal ethics and risk management advisor, I am often asked whether litigation between an attorney and client is permitted during engagement on another matter. This situation often arises as to legal fee disputes; however, lawsuits between in-house or staff counsel and their employer/client is another concern.

No California law or ethics rule expressly prohibits attorneys from suing clients while continuing to represent them. The Los Angeles County Bar Ethics Committee (“Committee”) has issued advisory opinions (1) regarding fee disputes between a lawyer and current client and the courts have addressed the pertinent California Rules of Professional Conduct (“CRPC”).

The California Supreme Court has held that Rule 3-310(B)(4), “addresses not the existence of general antagonism between lawyer and client, but tangible conflicts between the lawyer’s and client’s interest in the subject matter of the representation.”(2) The committee then opined, while a fee dispute, alone, falls within the rubric of a “general antagonism,” it does not create a per se conflict under Rule 3-310(C).(3)

Rule 3-300 does not apply to a legal services agreement unless it “confers on the member an ownership, possessory, security or other pecuniary interest adverse to the client.” The California Supreme Court has confirmed that a charging lien in a retainer agreement is an adverse pecuniary interest under Rule 3-300.(4) Thus, the committee urged the “line should be drawn” when the dispute changes from a unsecured demand into an action that can be reduced to a judgment or lien, constituting an adverse pecuniary interest.(5) One should ensure the engagement is over before suing a former client for fees.

Even if only “general antagonism” exists, an attorney must not “fail to perform legal services with competence.”(6) If a fee dispute reaches a point where a client’s interests can no longer be adequately represented, withdrawal should be pursued.(7) It is important to consider the applicable statutes of limitation. Filing a fee claim within one-year after representation ends could invite a malpractice claim.(8)
The courts have not specifically addressed whether in-house or staff attorneys may sue their current employer-client; however, the California Supreme Court has fashioned a limited right for such attorneys to sue their former employers for wrongful termination.(9)

The court recognized the common law rule allowing a client to terminate the attorney at any time for any reason is predicated on the relationship of an independent lawyer with a multiple client base,10 not in-house counsel with a single client. Guidance is gleaned from our high court’s rulings: (1) the in-house attorney’s complex, dual responsibilities to employer and client prevent retaliation for participation in an action against the employer/client, but rearranging assignments might ensure confidence in the continuing representation; and, (2) should an in-house attorney be discharged, a wrongful termination claim may be sought under certain circumstances.

About the author:

Kendra L. Basner is a partner in the San Francisco office of Hinshaw & Culbertson.  Her litigation practice focuses primarily on professional liability defense, with an emphasis on legal malpractice, legal fee disputes, legal ethics and risk management.

Footnotes
1. See Committee Opinion Nos. 521; 476; 362
2. Santa Clara County Counsel Attys v. Woodside (1994) 7 Cal.4th 525, 547
3. Committee Opinion No. 521
4. Fletcher v. Davis (2004) 33 Cal.4th 61, 67-69
5. Committee Opinion No. 521
6. CRPC, Rule 3-110(A)
7. CRPC, Rule 3-700(C)(1)(d)
8. Cal. Code of Civ. Proc. (“C.C.P.”) §340.6
9. See General Dynamics v. Superior Court (1994) 876 P.2d 487
10. C.C.P. §284; Fracasse v. Brent (1972) 494 P.2d 9